C-Shares go the way of the Do-Do Bird
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Ytrewq, what I'm trying to say is that I'm admitting that I don't understand the point that you are trying to make in that original post. Can you please reword it because there is something about it that is causing me to decypher it's meaning incorrectly and I'm interested in understanding your viewpoint as opposed to my obviously incorrect interpretation of your viewpoint.
I THINK he is trying to say that there are lots of suitable investments for clients. The MOST suitable investment of all those suitable options would be the BEST option.
That may be what he’s trying to say but in the end Anonymous has it more correct. There is never a BEST option that can be determined ahead of time. It’s only the BEST option in hindsight.
There are options that have historically been better but since my clients don't buy last year's returns, they buy next year's returns. By this I mean, widow comes in and says she has 100k to invest and it needs to last her 10 years. Historically putting her into 1 equity (say BofA Preferred-L's at $200 earlier this year) buying 500 shares that pay $72 a year in dividends (grossly undervalued at the time, but were yielding 36% at that price) would have been a bad idea. Now, knowing that BAC-L's are trading at approximately 880 per share as of this writing and still paying $72 per year in dividends. She's making 36,000 per year in Divdend income while having assets totaling $440,000. My suggestion would have been terrible at the time, but turned out to be possibly the 'best' idea, or 'most suitable' given her income needs. Bottom line is that 'Most Suitable' can't be measured going forward and trying to legislate Fiduciary responsibility will turn out to be very difficult. I would argue that it's also a down right bad idea for the government to be involved in anyone's personal situation because they make laws that 'blanket' situations because a law that says case-by-case doesn't work very well in enforcement.[quote=Jebediah]There is no reason for accounts under $100K to pay an advisor.
While I agree with this in theory, in practice it is false IMO. I have many clients that have $50m with me and $500m in their 401k. At the end of the day I am managing $550m for the client while getting paid on $50m. If you stop paying on these accounts, broker will ignore them and when rollover time comes, a broker won't get the business.[/quote] Really how many people really have this.. 1 out of 50? only 50K outside of a 401K?Theoretically you could argue that there is more to do and more investments available with a larger account that you couldn't or shouldn't do with a smaller accountIMO a client with 60k with me should pay the same loads/fee %'s/ commissons as someone with 110k. What makes my advice any less valuable to someone with a smaller account?
Choice... In a wrap account you can do anything.. Build a better allocation, "name your strategy" etc... Balanced fund of america, is one fund run by one fund company and sometimes they blow up(Putnam)This is the Obama administration believing it knows better than the client.
You watch, first they will take away C shares because they are not in the client’s best interest, then they will try to dictate how you set up your asset allocation.
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And I still don’t understand why a wrap account 1.35 management plus mutual fund expenses is better than Balanced Fund of America C shares.
[quote=aeromaks]
thats the whole point though, A C share is basicly the same as an A Share + 1% for fiduciary duty. Yet C share is just suitability.
The only people this is a negative for is brokers who sold C shares as a no load fund, or dont want to, or didnt disclose the higher annual expense to the client.
In the wirehouses I knew many corner office guys selling c shares as no loads and that is their book.
Either decrease the 12b1 on a c share and live with suitability, or put the account in a load waived A share and charge your advisory fee.
[/quote]This has gotten completely ridiculous. LSUAlum uses 5 paragraphs to comment on two sentences that I typed. He/She then throws in the argument that only the future will tell what was best.
Duh. Captain Obvious. My original post 3 pages back was saying that, in my opinion, one of the differences between suitability and Fiduciary Srandard is: Suitability is about the relationship between the client and the product. Fiduciary Standard is about the relationship between the Advisor and the client. In the future we are all dead.[quote=ytrewq]This has gotten completely ridiculous. LSUAlum uses 5 paragraphs to comment on two sentences that I typed. He/She then throws in the argument that only the future will tell what was best.
Duh. Captain Obvious. My original post 3 pages back was saying that, in my opinion, one of the differences between suitability and Fiduciary Srandard is: Suitability is about the relationship between the client and the product. Fiduciary Standard is about the relationship between the Advisor and the client. In the future we are all dead. [/quote] This statement I believe in. What I was commenting on is the notion that Fiduciary Standard is about making the 'most suitable' recommendation. Since that is impossible given the unpredictability of the future it is an impossible standard to try to enforce. Duh, Captain Obvious. In the future, things will be about the same as they are now. Laws or regulations that are passed but completely unenforceable do not change the way things work.[quote=chief123][quote=Jebediah]There is no reason for accounts under $100K to pay an advisor.
While I agree with this in theory, in practice it is false IMO. I have many clients that have $50m with me and $500m in their 401k. At the end of the day I am managing $550m for the client while getting paid on $50m. If you stop paying on these accounts, broker will ignore them and when rollover time comes, a broker won't get the business.[/quote] Really how many people really have this.. 1 out of 50? only 50K outside of a 401K?[/quote] I would say it really depends on your practice. In my area, we have two large employers that are the majority of the "corpörate"jobs in the region. So if you focus on corporate employees/rollovers, you will get a lot of this. Many 45-50 year olds with several hundred thousand in 401k, but not much (for investments) outside 401K. Maybe some savings, education funds, whatever, but nothing really meant for investing long-term. However, I know exactly what each client has. I don't keep/take small accounts unless I KNOW that they have some other funds I can eventually get. And I don't take the 75 year-old widow with a 46K IRA to her name. But I will take the 45 year old scientist with 200K in his 401K, and 25K with me.[quote=chief123] [quote=Jebediah]There is no reason for accounts under $100K to pay an advisor.
While I agree with this in theory, in practice it is false IMO. I have many clients that have $50m with me and $500m in their 401k. At the end of the day I am managing $550m for the client while getting paid on $50m. If you stop paying on these accounts, broker will ignore them and when rollover time comes, a broker won’t get the business.[/quote]
Really how many people really have this… 1 out of 50? only 50K outside of a 401K?[/quote]
Every 50 yr old married man with a wife that spends what is in the checking account at month end but happens to be smart enough to defer into his 401k each month. {A little self reflection here.)
One other thing - for the most part, the only people that have a lot outside their 401K/IRA are either business/real estate owners (or formerly were), or highly paid executives. I have many clients that earn 175-250K and don’t have much outside their retirement accounts because they live a pretty “full” lifestyle. Most “employees” (versus business owners) have a hard time holding onto cash that is accessible. And the only reason most of them have decent 401K balances is because they are penalized and taxed for taking it out. Most good business owners have a healthy respect for cash, liquidity, and non-qualified assets.
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[quote=Squash1]
People with less than $50K, will be forced to pay A shares or go to Vanguard and right fully so. There is no reason for accounts under $100K to pay an advisor.[/quote] Nail = HeadI believe in freedom of choice. Clients dont have to buy c-shares. It’s a choice.
Want more disclosure ? I’m fine with that. Put the expense ratio for all funds on an end of year statement I could care less.
I do plenty of c-shares and my clients know exactly what they are getting into and when the market tanked in 08 and I sold some ( not nearly enough ) my clients were happy they didnt pay the front end load and didnt have to pay to get out.
In the end my guess is after a certain amount of time c-shares will end up converting to a shares after 7-8 years or something like that.
If they want to do away with c’s I’m just going to wrap all my clients in fees and they wont be better off cost wise ( and I know the service I give them now in c’s is just as good as I’d give them if I wrapped them )
And if they didnt want to pay the wrap then I’d boot them and then they will really be screwed
[quote=san fran broker][quote=Squash1]
People with less than $50K, will be forced to pay A shares or go to Vanguard and right fully so. There is no reason for accounts under $100K to pay an advisor.[/quote] Nail = Head[/quote] I'd argue that the accounts under $100K get more, dollar for dollar, than larger accounts. Knowledge, a central repository, goals, proper asset allocation, individualized responses, at Jones they'd get a financial plan - for a relatively small amount of money. There's probably no reason for an upwardly desirious financial advisor to take money from an account smaller than $100K - unless some other reward awaits later.Nice thread.When you start penny stocks trading career you first need to decide how much
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MatthewBracken - Most people on here are not trading penny stocks. Might be a good idea to post on a different message board.
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